Toy Industry Responds To A Changing Market--And Changing Kids

NEW YORK--(BUSINESS WIRE)--Oct. 6, 2005--When Toy Wishes(TM) magazine revealed the holiday "Hot Dozen" at its press conference this morning, the seventh annual list reflected both a radically evolving toy industry and the perennial fact that no matter how sophisticated the toys themselves become, most innovative and successful toys embody the principles of classic play.

"One of our primary criteria for determining what makes it onto the list is whether or not the toy is fun," said the magazine's editor-in-chief Jim Silver. "Without that, all the technology in the world is meaningless." However, Silver added, the industry is currently trying to keep pace with the evolution of kids' worlds. "Things we're seeing today would have been unimaginable even five years ago," he says, "and while adults may say 'wow,' kids take it all in stride." Silver says that categories like 'Tween Electronics' are so new that retailers are changing merchandising strategies to accommodate these new and popular products and that this development is requiring that everyone in the industry rethink elements of their business from the ground up.

"We are in the midst of the most dramatic shift in the toy industry since the 1950s," says Christopher Byrne, contributing editor whose article in the current Toy Wishes on "the balanced toy box" includes insights on the various ways kids do--and should--play. "The availability of technology means that toys do more, but that final step in bringing the toy alive must happen when a child's imagination connects to the toy." Byrne calls today's kids "technologically agnostic," saying that kids like particular toys because they like the experience that individual toy provides, not because a toy has a chip in it. "Look at Yu-Gi-Oh! cards," he says. "These are still insanely popular, and they're just paper and ink--with occasional foil accents. Kids are as likely to embrace that play pattern, if it's something that appeals to them, as they will something like Zizzle's iZ or Hasbro's VCam Now, which are technological marvels that still deliver a solid, classic play experience."

Byrne also notes that while kids gravitate naturally towards a variety of toys, technology, particularly in the past two-to-three years is having a profound impact on what constitutes a toy. "A century ago, many toys were interpretations of adult items for children. However, technology has changed that. With kids being able to operate and master all sorts of technology from the adult world, from iPods to cell phones, there has to be a compelling reason for a toy version of an adult tech product to be relevant."

Byrne says that because kids are easily able to download music and install it on an iPod, for example, a toy music item that simulates that activity would only have a very limited market among younger children. At the same time, he points to Hasbro's VCam Now, Mattel's Vidster and MGA's Bratz Video Cam as items that do have relevance in the toy aisle. "These real, working video cameras cost under $100," he says, "and they deliver a full experience that's easy for kids to use to get great results. And mom and dad don't have to worry about the kids breaking the family's video camera."

Silver concludes saying, "The nature of play remains unchanged. It's all about kids discovering and expressing themselves in the context of the world they are living in. Today's world encompasses an incredible variety of experiences, and there's no reason kids won't want to have a great many of them."

Here are five of the key trends that the Toy Wishes staff sees as shaping the industry and consumption patterns throughout this year and into 2006:

Educational toys reach the "whole child."

The success of VTECH's V.Smile system and Leapters' L-Max platform represent the ways in which educational toymakers are moving beyond simply feeding kids with facts. There is a growing understanding that children's engagement helps them learn, so the introduction of appealing play formats--video games--helps provide a more immersive learning experience.

The experience rules.

Whether it's a Furby, Fly Wheels or Black Belt Karate set, the ability to engage children in a specific experience helps make a better toy. Products like Mattel's Pixel Chix have also been designed to take into account the different style in which today's kids play. That is, they may be multi-tasking, or they may have only a few minutes and want entertainment. At the same time, the toy needs to be complex enough for extended play when the child has the time and the interest.

Children are consumers too.

From a very young age, today's kids are savvier consumers. The growth in gift cards, and the increasing frequency with which kids request gift cards indicates that when possible--and when parents and caregivers agree--kids want to be in control of their own purchases. Because kids are exposed to media as much as adults, it's only natural that they will want things like cell phones at earlier ages. Mom and dad's job as the gatekeeper may be a little more demanding, but it behooves them to know what their kids are being exposed to and asking for.

Classics still abound.

The growth in activities, strength in board games and the popularity of re-releases of classic video games in plug-and-play formats continue to demonstrate that kids and families are engaging in a variety of activities.

There will be good deals this year, but...

Retailers have already announced that they are going to be aggressive on their pricing this year, so it's likely that consumers will be able to find some very good buys. However, it pays to buy early as many of the hot items will sell out. At the same time, toy prices are likely to increase over the next several seasons as the impact of petroleum prices affect plastics, shipping and all energy costs. Adjusted for inflation, however, toys are still a great value, delivering significantly more play per dollar than even ten years ago.

"There are always those who are predicting the shrinking of the toy industry," says Silver. "But we don't see it happening. What we do see happening is a broadening and an evolution into family entertainment. Additionally, we see a call for even greater innovation to meet the challenges of a changing economic and cultural environment. The toy industry today looks very different from the way it did in the 70s, 80s and 90s, and it will likely look different again in another ten years, but as long as we keep having kids, they'll keep wanting to play. The challenge remains as it has always been--to deliver excitement and fun to each successive generation of kids."